Interstate Tractor & Equipment Co. v. The Mylark

• Decision Date: 24 March 1950
• Docket Number: Civ. No. 5061.
• Citation: 90 F. Supp. 466
• Parties: INTERSTATE TRACTOR & EQUIPMENT CO. v. THE MYLARK et al.
• Court: U.S. District Court — District of Oregon

90 F. Supp. 466

INTERSTATE TRACTOR & EQUIPMENT CO. v. THE MYLARK et al.

Civ. No. 5061.

United States District Court D. Oregon.

March 24, 1950.

Erskine B. Wood (Wood, Matthiessen & Wood), Portland, Oregon, for respondent.

MacCormac Snow, Portland, Oregon, James Castles, Portland, Oregon, and A. C. Fulton, Astoria, Oregon, for intervening libelants.

SOLOMON, District Judge.

On July 10, 1948, claimant, Malarkey Logging Company, agreed to sell, and one R. B. Cutting agreed to purchase, a fishing vessel known as the M. S. Mylark for the sum of $30,000.00 payable as follows: twenty-five percent of the gross catch but not less than $6,000.00 a year beginning July 9, 1949, title to remain in the seller until the full purchase price was paid.

Because of Cutting's failure to make the required payments, claimant repossessed the vessel in September 1949. Thereafter Interstate Tractor & Equipment Co. filed a libel against the vessel, and a number of other creditors intervened claiming liens for repairs, supplies, labor, and other necessaries furnished the vessel during the time the vessel was in the possession of Cutting.

The vessel was sold by order of the Court and the proceeds in the registry of the Court are sufficient to pay in full all claims of the libelant and the intervening libelants.

The claims of the libelant and the claims of the intervening libelants, with the exception of Point Adams Packing Co. and Englund Marine Supply Co., were either paid in full or compromised. The only remaining controversy is between the claimant and the intervening libelants whose demands have not been compromised.

The intervening libelants claim that they are entitled to maritime liens on the vessel by reason of the fact that the supplies furnished were necessaries within the meaning of the Ship Mortgage Act, 1920, and that such supplies were ordered by Cutting on the credit of the vessel and that Cutting, being a contract purchaser, was the person authorized to bind the vessel.

Claimants deny such claims and allege that Cutting had no authority to bind the vessel for necessaries by reason of the fact that the claimants had knowledge or, by the exercise of reasonable diligence, could have ascertained that Cutting was purchasing the vessel under a contract which deprived him of such authority.

The intervening libelants claim that they had no knowledge of such contract or its terms; and, since the contract had not been filed, recorded, or indexed in the office of the Collector of Customs or in the office of the County Clerk at Astoria, Oregon, the home port of the vessel, and had not been noted on any of the ship's papers, they were deprived of the opportunity to ascertain the contents of such contract.

The Ship Mortgage Act, 1920, 46 U.S.C. A. §§ 911-984, provides:

Sec. 971. "Any person furnishing repairs, supplies * * * or other necessaries, to any vessel * * * upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall not be necessary to allege or prove that credit was given to the vessel.

Sec. 972. "The managing owner, ship's husband, master, or any person to whom the management of the vessel at the port of supply is intrusted," shall be presumed to have such authority.

Sec. 973. "The officers and agents of a vessel specified in section 972 of this title shall be taken to include such officers and agents when appointed by a charterer, by an owner pro hac vice, or by an agreed purchaser in possession of the vessel." However, another portion of the same section provides, "Nothing in this chapter shall be construed to confer a lien when the furnisher knew, or by exercise of reasonable diligence could have ascertained, that because of the terms of a charter party, agreement for sale of the vessel, or for any other reason, the person ordering the repairs, supplies, or other necessaries was without authority to bind the vessel."

The contract between claimant and Cutting contained the following provision: "The purchaser shall keep the vessel in good condition and repair, free and clear of all liens and encumbrances and he shall pay all of the taxes levied against the vessel or its operations before they become delinquent. The purchaser shall not mortgage, pledge, or otherwise transfer or dispose of his interest in the vessel."

Claimants contend that the construction of such language is governed by United States v. Carver, 260 U.S. 482, 43 S.Ct. 181, 67 L.Ed. 361, and by the following cases, all of which adhere to the rule laid down in the Carver case: United States v. Voelp, 4 Cir., 296 F. 119. The Westhaven, D. C., 297 F. 534, affirmed Old Dominion S. S. Co. v. U. S., 4 Cir., 3 F.2d 1021, Standard Oil Co. v. U. S., 4 Cir., 1 F.2d 961, Frey & Sons v. U. S., 4 Cir., 1 F.2d 963, North Coast Stevedoring Co. v. U. S., 9 Cir., 17 F.2d 874.

In the Carver case: "The United States owned the vessels, but they were in the possession of the corporation under charters by which the corporation was to pay all costs and expenses incident to the use and operation of the vessels, and `will not suffer nor permit to be continued any lien, incumbrance, or charge which has or might have priority over the title and interest of the owner in said vessel.' It was stipulated further that in any event within fifteen days the charterer would make adequate provision for the satisfaction or discharge of every claim that might have priority over the title, &c., or would cause such vessel to be discharged from such lien in any event within fifteen days after it was imposed." The Court construed this language to mean that the charterer "will not suffer any lien nor permit the same to be continued," and that "a lien shall not be imposed."

In the Carver case, as well as in all of the other cases above cited, the libelants claimed liens on vessels which were being purchased on contract from the United States Shipping Board Emergency Fleet Corporation and in each of such cases, with the exception of the Voelp case, the Court in its opinion set out the provision in the agreement construed in the Carver case dealing with liens and encumbrances, which provision was part of the standard form of agreement adopted by the Shipping Board for conditional sales as well as charter parties. The Anna E. Morse, 3 Cir., 286 F. 794, 800.

The Frey case, after referring to such provision, stated: "There may be doubt whether this provision of the contract, standing alone, forbade the creation of a lien on the vessel by the conditional purchaser; but we think all doubt is dispelled by another provision of the contract for the sale of the vessel: `The buyer agrees to carry a properly certified copy of this agreement with the ship's papers, and to take such other appropriate steps designated to it by the seller from time to time as required by circumstances as will give notice to the world that the buyer has no right, power, nor authority to suffer or permit to be imposed on or against the vessel any liens or claims which might be deemed superior to or a charge against the interest of the seller in the vessel.'" 1 F.2d 964

Such additional provision makes it abundantly clear that the seller intended to deprive the contract purchaser of authority to permit the creation of maritime liens.

It is significant that in each of the cases cited by claimant, other than the Carver and Voelp cases, the same...